InformationWeek
Defining The Business Value Of Technology
April 27, 1998
Sears, Roebuck & Co.Productivity Gains From Mobile Computing
By Bob Violino
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Boston Beer Co.
Case Corp. Elf Atochem Hilton Hotels Sears, Roebuck & Co. ROI In The Real World |
ennis Honan, an IS executive at retailer Sears, Roebuck & Co., is a veteran of what he calls the company's "ROI culture."
Honan, VP of IS for Sears' Home Services business, and other executives in his group got approval to spend some $20 million to equip his unit's 14,000-person service staff with handheld PCs. Honan, sounding like a military recruit who's just gotten through basic training, says the process was grueling, but worthwhile. "It was one of the largest, most ambitious projects we had ever put together," he adds.
The overriding goal of the project was to improve the efficiency of Sears' service technicians. Not only were they to be given handheld computers, but the devices would also be linked by wireless WANs to Sears databases. Honan projected an average 6% to 8% gain in the technicians' prod uctivity, mainly because the setup would let them request price estimates, check availability for appliance parts, place orders, receive software upgrades, and get job-schedule updates from wherever they were working. That, in turn, would let technicians complete more calls a day.
Also, when customers cancel or reschedule service calls--something that happens up to 100 times a day in some districts--technicians and dispatchers learn about the changes and make adjustments almost immediately. In the past, they'd be paged, have to find a pay phone, then wait for instructions. "Here was an opportunity to computerize everything, eliminate paper service orders, and have the ability to communicate almost instantaneously with the technicians," says Vince Accardi, director of process management.
Sounds good enough to go, but presenting a formal ROI analysis was "absolutely essential" to the approval process, Honan says. "Without that," he adds, "we wouldn't have gotten approval and wouldn't have eve n pitched the idea."
Adds Joseph Smialowski, Sears' senior VP and CIO and a key player in the approval of all types of investments at the retailer, "All our projects-whether it's opening new stores or buying new systems-have to compete for the capital that's available. There are really no projects that can slip through without going through a quantitative analysis."
To justify the handheld-PC initiative, Home Services managers used a cost/benefit measure to determine net annual savings. To illustrate the longer-term benefits of the investment, they also calculated the net present value (NPV) of cash flows over a five-year period. (NPV equals the value in current dollars of net benefits realized over time from a specific investment.) Cost components included handhelds from Itronix Inc., peripheral devices, gateways and routers, in-house software development, and training. Operational costs included a wireless communications network from Ardis and RAM Mobile Data.
Home Services presen ted the expected benefits in terms of expected annual savings for Sears. This included reduced or eliminated overtime pay, more efficient use of regular hours, profit on incremental paid labor, the elimination of data entry, and improved routing support.
The financial plan also included a "sensitivity analysis" that broke out critical variables-such as sites completed per day-into worst-case, likely case, best-case, and break-even scenarios. These let planners project annual savings in four scenarios.
The project proposal and financial payback plan then went through a multilevel evaluation process. Once the business case was approved within Home Services, the project was considered along with competing projects as part of the overall company planning process, says Graham Waller, Sears' systems director of strategic planning. This process involves Sears' IS and corporate strategy departments, which together prioritize projects and resource allocation across the enterprise. Waller and CIO Smi alowski evaluated the plan for its technical soundness, to ensure that the cost estimates were comprehensive and accurate, and to see if the plan fit Sears' business model and enterprise architecture.
The proposal then went to Sears' finance committee, which includes the company's CEO, chief financial officer, CIO, and two business presidents. They approved the project. It was then rolled out, first in test markets, then district by district. Sears has deployed about half of the handheld devices and expects to complete the rollout soon.
Sears is also evaluating an upgrade of the handheld systems from DOS to Windows. Accardi says he's preparing an ROI analysis, and he expects to complete the upgrade by year's end.
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